Jared Kushner buys gaming giant in $55bn mega deal

How big can buyouts of public companies get? Last week’s $55bn deal to take the gaming giant Electronic Arts private set a new record. The previous biggest buyout of a listed company was in 2007, when Texan energy utility TXU was acquired by KKR, TPG and Goldman Sachs for $44.3bn. But KKR’s most infamous deal – the disastrous “Barbarians at the Gate” buyout of RJR Nabisco for $31bn in 1989 – was adjusted for inflation, to roughly what Saudi Arabia’s Public Investment Fund (PIF), Silver Lake and Donald Trump’s son-in-law Jared Kushner’s Affinity Partners are paying for Electronic Arts.

There is no lack of cash for even bigger deals. Silver Lake, led by the ambitious Egon Durban, is emerging as one of the boldest movers in a private equity industry sitting on an estimated $1.2tn in unallocated capital. Add the bulging pockets of sovereign wealth funds such as PIF and credit markets seeking bigger opportunities, (JP Morgan arranged $20bn in debt for the EA deal) and a $100bn corporate buyout no longer seems inconceivable.

Exiting a record deal profitably may be the tougher challenge. Private equity firms have been finding it hard to offload companies quickly and lucratively enough to generate enough return on investment, especially in a sluggish market for initial public offerings. There has been a surge in “flipping” companies between private equity firms, which may be good for private equity bosses but less so for their investors.

The bigger the company, the harder it may be to sell it on. Size may also bring greater complexity, making it harder to deliver operational improvements.

Big deals can also attract greater regulatory scrutiny – but, in the US at least, having a member of the first family on the acquisition team probably helps with that.

Photograph by the Canadian Press/Alamy Live News